Munich Personal RePEc Archive

The Pursuit of an Effective Balanced Budget Amendment

Cebula, Richard (2010): The Pursuit of an Effective Balanced Budget Amendment. Published in: Tax Notes , Vol. 132, No. 10 (5 September 2011): pp. 1046-1050.

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This article provides an alternative to the standard simplistic form of a balanced budget amendment to the U.S. Constitution. Instead of simply prohibiting government outlays from exceeding government revenues, which could lead to higher government spending and to higher taxation levels, this proposal provides potential flexibility in the federal budget and deficit conditions (when necessary) while protecting against tax increases and excessive growth in government outlays. The proposal prohibits government spending from exceeding revenues; however, under some conditions, with the approval of a two-thirds majority of both the House and Senate along with approval of the president, a temporary budget deficit of up to 2.5 percent of GDP could be authorized. The requirements that must be met for such a limited budget deficit include the following: the ratio of government spending to GDP may not exceed 20 Percent (its approximate average historical level), and the unemployment rate must exceed 8 percent (to reflect genuine recessionary conditions). The conditions could be modified; for example, a 7.5 percent unemployment rate could be adopted.

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